Expansion accounts for Tenon woe

TENON, the leader in the new pack of quoted accountancy firms, said that it is paying the price for rapid expansion. It warned that this year's profits will be a fraction of what the market has been expecting.

Tenon shares immediately fell 24% or 27p, going below the float price of 100p to a new low of 85 1/2p, against a high 12 months ago of 174p. Floated last year, the company has combined 16 accountancy practices in 13 months in an attempt to build a nationwide alternative to middle-ranking professional services firms such as BDO Stoy Hayward and Grant Thornton.

Chief executive Ian Buckley said that in the integration process feeearners had spent too much time restructuring the business and costs had spiralled as new people were taken on. Profits for 2001 will be between £500,000 and £1m against an expected £6m.

Buckley said that the firm was still on track to hit analysts' estimated profits of up to £16m in 2002 on turnover that should reach £100m by the end of the year.